Defence OKs $600m Oxiana mine
Andrew Trounson
July 13, 2006
AMID the euphoria over the discovery of the Challenger gold deposit back in 1997, it seemed it was only a matter of raising funds and securing normal approvals before a mine could be in place.
But the explorers hadn't reckoned on the Department of Defence.
When it came to developing a mine, Dominion Mining and then partners Resolute Samantha were shocked to discover they had no development rights because Challenger was within the Woomera air force missile testing area, north of Adelaide, an area about twice the size of Tasmania.
Securing approval for the mine, which now produces 90,000 ounces a year, from a military more accustomed to viewing the area as a missile target than an Eldorado, was a tortuous affair, geologist and Dominion chief executive Peter Alexander recalls.
"Because it was the first one, it actually took a hell of a long time. It took the longest of all the things we had to do, including native title," he said. Yesterday, the military was mistakenly trumpeting as the first of its kind an agreement to allow Oxiana to develop its $600 million-plus Prominent Hill copper-gold mine within the firing range.
But while the air force seemed to have temporarily forgotten Challenger, which provided the template for the Oxiana agreement, the Oxiana deal is still a major milestone - because Prominent Hill will be a much bigger "target".
While Challenger is in the far west of the range, some 400km away from the missile launching sites near Woomera, Prominent Hill is a much bigger development and is situated more in the middle of the range, about 200km from Woomera.
"We are very pleased with the agreement because there seems to have been a change in attitude and Defence is now saying we will work with the resources industry," Phil Sutherland, chief executive of the South Australian Chamber of Mines and Energy told The Australian.
While the lack of certainty for explorers sinking millions of exploration dollars into the firing range remains a concern for the industry, the Oxiana deal does now provide an encouraging precedent, Mr Sutherland said.
Under the agreement Oxiana will have to provide bomb shelters for its workers at Prominent Hill, just as all the pastoralists in the area do. And Oxiana may even on occasion be asked to evacuate ahead of a test, though this is expected to be very rare.
Currently all explorers in the area have to tune in to military radio notifications of any planned testings. Warnings are made about three months ahead.
At the Challenger mine, the workers initially had access to a shelter on the old Jumbuck station some 5km away. But since the open pit mine went underground in late 2004, if they ever have to dodge a missile they have a ready-made shelter in the form of the mine itself. To date, however, Challenger's operations never being affected by the air force.
"It hasn't been any trouble," Mr Alexander said, though explorers elsewhere in the range did occasionally come across the shredded remains of old missiles.
"If we get rubbed out I'll give you a call," he joked. Unlike Challenger, where an agreement with the military took two years or more to finalise, the agreement on Prominent Hill has been done in only a matter of months.
"It has all been very co-operative. They understand the importance of it and it has been a good negotiation," an Oxiana spokeswoman said yesterday.
Thanks to the experience at Challenger and the global commodities price boom that has brought record numbers of explorers to the outback, the Defence Department is now clearly on board with the miners.
"Defence is committed to co-existence with industry and this access agreement with Oxiana demonstrates that commitment," Acting Air Force chief, Air Vice-Marshal John Blackburn said.
"The open and effective communication between Oxiana and Defence has ensured that the economic value of land in the Woomera area can be exploited without negative effect to significant Defence capability."
Oxiana is aiming to produce 100,000 tonnes of copper and 12,000 ounces of gold a year from Prominent Hill with first production in the second half of 2008. At the height of construction some 800 people will be working on the site and it will have a permanent workforce of 400.
Yesterday, Oxiana announced updated resource numbers largely in line with the pre-feasibility study, but extending the life of the first phase of mining by one year to 10 years.
While the bankable feasibility study won't be completed till August, when the project is expected to get the official go-ahead, Oxiana has already committed to spending $33 million on design work and in pre-ordering equipment as it tries to stay ahead of labour and equipment shortages delaying resource projects across the country.
Key for investors will be the final cost of the project. Oxiana last year estimated the cost at $530 million, but analysts expect it to be closer to $700 million.
"Prominent Hill's robust fundamentals ensure that its costs will be competitive after allowing for current trends in capital and operating costs across the industry," Oxiana said.
The Australian
OXR
oxiana limited
